Innovation and Foreign Ownership
INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
New Economic School (NES); Columbia University - Columbia Business School
Columbia Business School - Finance and Economics
November 22, 2010
CEPR Discussion Paper No. 8141
This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.
Number of Pages in PDF File: 43
Keywords: Foreign Ownership, Productivity, Multinational Production, Innovation
JEL Classification: D22, F23, O31working papers series
Date posted: November 30, 2010
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